||12-06-2010 04:37 PM
You are correct, that the password is stored recursively in the key itself and it is needed to obtain useful information with the key. Given time, though, passwords can be cracked. By denying them access to the key, they can't try to brute force the password. Anybody with access to the machine can tell that you have private keys stored on the machine. By putting the keys in an encrypted volume, anyone who gets the USB stick does not know what is in the volume, unless they first crack that layer, given them another hoop to jump through in order to obtain they keys.
Once where I worked, I had a partial compromise by a coworker. I experimented with encrypting my home directory, purely for experimental purposes. Against my better judgment, I permitted the few users of the system to have sudo privilege reasoning that we all worked together and shared the system for common goals. Apparently one of them became curious about my encrypted folder and changed my password, presumably to then gain access. Fortunately, I did not put my private keys on that computer, but I had them on another machine. It was at that point, I decided to put them on a USB stick so that I could use them when I wanted to and then take them with me.